Politics & Policy

Risk Mismanagement

Nothing ventured, nothing gained — but Americans have become afraid of risk.

‘To make glass is to know failure,” wrote Ryan Bradley in a Fortune magazine profile of Corning, Inc., which makes the glass that covers iPhones. A glassmaker starts out with powders of oxides and stirs them into a platinum crucible. He sticks that brew into an oven that’s more like an inferno, set at a temperature of 2,912 degrees Fahrenheit. In that oven, the oxides melt into a liquid. The glassmaker then removes the crucible, the liquid cools, and the concoction hardens to glass. A team of researchers then inspect the chemical makeup of the glass. They carefully study the seeds, otherwise known as bubbles.

“But to really know glass, to get a sense of its strength, you must break it,” wrote Bradley. “So someone bends and hammers and sometimes throws baseballs at the glass until it scratches or cracks or shatters.”

The glassmaker then studies the fractures, which reveal the glass’s secrets. Glass fails, Bradley wrote; the researchers then learn from the failure, and the cycle repeats. And improves. Glassmakers know that from failure comes strength. And there is no failure without risk. There is no growth — no success — either.

Human beings grow stronger through failure, too. Only by taking risks do we experience failure and its companion, success.

Think about the most basic risk we take each day. We leave our home and get into the car. We do that knowing that 30,000 people a year die untimely deaths because they have taken that risk. But to not get out into the world would be a bigger risk. Because we’d be missing out on all kinds of opportunities.

Each of us takes risks with our hearts. We tell people we love them. We open our hearts to the risk that the person we love may not return our love. Or may betray us. But the bigger risk is to not love.

“We must love one another or die,” says one of the 20th century’s greatest poems, “September 1, 1939,” W. H. Auden’s reflection on the start of World War II.  Even amidst the outbreak of a kind of chaos that makes our current chaos look like child’s play, Auden left readers with a stark choice. Love. Or die.

Some of us take an even bigger risk and get married. We take that crazy “till death do us part” oath. It would be far more practical to shack up together and see how things play out. Why take the risk of making a lifetime commitment to another human being, when you don’t even know what the next year will bring, let alone the next ten?

Some of us double down on that commitment and take a bigger risk: We start a family. Life would be easier — and cheaper — for married people if they chose not to have kids. Kids are loud and smelly and selfish and need years — in some cases, decades — of nurturing to face the exigencies of the world on their own. It’s easier to tame a lion than to rear a child.

And then there is a different sort of risk: starting a business. Given the odds against success, it is the biggest risk people can take with their capital. And their time. It’s their dreams as well as their life savings they put on the line. The workload is brutal, and there are so many ways a business can fail that a clever entrepreneur is lucky if he or she can guard against half of them.

All this risk taking — with our hearts, our lives, and our treasure — fuels not only personal growth, but the growth of economies and of nations.

But fewer and fewer Americans are taking these kinds of risks. The reasons are complex, part economic and part cultural. But the numbers don’t lie.

A recent Wall Street Journal article, headed “Risk-Averse Culture Infects U.S. Workers, Entrepreneurs,” revealed some startling facts and figures. Companies are adding jobs more slowly, even in good times, and investors are putting less money into new ventures. And Americans are also starting fewer businesses.

How important are startups to our economy? “When it comes to U.S. job growth, startup companies aren’t everything. They’re the only thing,” a Kaufman Foundation study reported not too long ago. Each year, on average, new firms add 3 million jobs to the economy, while older companies lose 1 million jobs annually.

In 1982, companies that had been in business less than five years made up almost half of all American companies. Half! By 2011, that number had declined to slightly more than a third. Over that same period, the percentage of America’s work force employed by new companies dropped from over 20 percent to less than 11 percent.

Americans’ appetite for starting businesses is on the decline, and so is our appetite for marriage. In 2011, 51 percent of Americans were married, compared to 72 percent in 1960, according to the Pew Research Center.

The numbers don’t look much better on the children front. Pew reports that the U.S. birthrate hit the lowest point ever recorded in 2011, with a mere 63 births per 1,000 women of childbearing age. That’s down from 122.7 in 1957.

As David Brooks of the New York Times pointed out in a recent column, there are now more households with dogs than with children.

This is all a reflection of a cultural shift away from what some experts call a child-centric understanding of love and marriage. Back in 1990, 65 percent of Americans agreed that children were a “very important” part of a successful marriage. By 2007, that number had shrunk to 41 percent.

Why are we taking so much less risk?

Much of it can be attributed to the economy. The recession is technically over, but unemployment is still very high, and there is lots of uncertainty. Few people are inclined to take risks when they feel lucky just to have a job.

Part of the calculus is affordability. It is expensive to raise kids. And it is very expensive to start a business and fail. Start with loss of capital, and include lost wages and opportunity costs, and the numbers really add up.

Part of it is cultural. From rubberized playgrounds to scoreless soccer, from social promotion to no red ink on school papers, from automaker bailouts to bank bailouts, we are living in a culture where risk taking isn’t cultivated, and failure isn’t permitted, and the quality of our lifestyles is more important than the quality of our lives.

But a big part of it just might be that we’ve lost faith in ourselves. With the culture everywhere trying to protect us from harm, we’ve lost the pioneer spirit that generations before us had and acted upon without much worry or navel-gazing.

We may also have lost our belief in the idea that taking risks and taking on responsibilities — and enduring a failure here and there — builds character. Of individuals. And of a nation.

And we’ve lost all sense of history. America has faced much worse perils than a slow-growing GDP and 8 percent unemployment. We’ve survived a battle for independence, a civil war, two world wars, recessions, and depressions — and, always, we’ve come out a stronger country.

What’s the solution? Maybe our leaders — in our families, churches, businesses, and government — need to encourage more risk taking, from public policy right down to discussions in the public square. The rational kind of risk taking, that is, not the crazy kind that led to the real-estate bubble and the financial crisis that followed.

Why take risks? Because the rewards are worth it, we need to argue. Because not taking risks is more dangerous than taking calculated ones. Because success is usually a result of failures along the way.

“I think of my failures as a gift,” A. G. Lafley, Procter & Gamble’s CEO, and widely regarded as one of the best business leaders of his generation, told Harvard Business Review in 2011. “My experience is that we learn much more from failure than we do from success.”

Failure is nature’s way of teaching us lessons we can’t learn any other way. Protecting our kids — and our citizens — from life’s every risk is simply not possible. And if what you are trying to cultivate in the culture of a family — or a country — is independence and self-reliance, such efforts will actually have the very opposite effect, breeding more dependency and an inability to cope with the realities of life.

If we don’t get in our cars and drive, a part of us dies.

If we don’t take risks with our hearts, love dies.

If we don’t marry and have children, civilization dies.

If we don’t start and invest in small businesses, our economy dies.

Just look at Europe. Look at its startup rates and fertility rates. Both are a direct consequence of too much government creeping into every aspect of daily life. It has sucked the energy and optimism and hope out of the economy. Out of life.

And for what seems like an eternity, our economy here in America has seemed dead, or in a dead stall.

If we don’t unleash the animal spirits in this nation, especially of all those new businesses waiting to be started and all those old businesses waiting to expand, we may be looking not just at a lost decade. We may be looking at lost generations.

Lowering corporate taxes and taxes on dividends — rewarding success rather than demonizing it — would be an excellent start. Such a move would unleash hundreds of billions in socked-away cash into the capital markets. It would unleash risk taking in boardrooms across America, and in garages too. Banks might start lending again, and soon, the animal spirits might get unleashed in America’s bedrooms, too.

Americans desperately want to take that leap of faith into the risk pool. We want to throw caution to the wind and commit to loving one another forever. Buying that new house (this time with 20 percent down). Having that first baby. And another. Starting more businesses. And investing in more businesses.

Americans are ready to put the past behind us, and start acting like Americans again. Like the hopeful, optimistic people we’ve always been. We’re ready to take chances again and, like those researchers at the Corning factory, emerge from our failures stronger.

In the end, it is we the people who will lift us out of this morass, not the government. We need leaders who believe we can do it.

— Lee Habeeb is the vice president of content at Salem Radio Network. He lives in Oxford, Miss., with his wife, Valerie, and daughter, Reagan. Mike Leven is the president and COO of the Las Vegas Sands and a member of the Job Creators Alliance.


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